10 Market-Beating, Low-Beta Stocks

by Dan Burrows | May 22, 2012 7:30 am

10 Market-Beating, Low-Beta Stocks

Investors who’ve been slammed by two wealth-crushing sell-offs since the young century began are understandably keener than ever on playing some defense in their equity portfolios. Although there’s no such thing as a crash-proof stock, some names do indeed fare much better than others when the bottom falls out of the market.

That’s why investors can benefit from checking out a stock’s beta, which is a measure of volatility. A beta of 1.0 means the stock moves essentially in line with the broader market. Theoretically, a beta of 1.5 indicates that a stock is 50% more volatile than the S&P 500. Yes, it will rise faster than the broader market when everything is rising — but it will also fall faster and farther when the market is selling off.

Low-beta stocks, on the other hand, tend to lag when the market is taking off, but hold up much better when the S&P 500 is in the tank. Best of all, sometimes these relatively boring names produce market-beating returns.

Using data from S&P Capital IQ, we screened the S&P 500 looking for big, brand-name stocks with the lowest five-year betas that have also crushed the broader market over the past five years.

Here’s a look at how our top 10 names have performed, including dividends. Keep in mind that the S&P 500 is down 1% on a total-return basis over the same period, and you can see that sometimes boring is beautiful.